March 2019 Volume LIV Number 2

Treloar & Heisel

Whole life insurance need not just benefit your survivors. Leverage this multi-faceted tool as part of your retirement planning strategy.

Contributed by Treloar & Heisel, Inc.
Last segment in a three-part series of articles about whole life insurance.

Over the course of this article series, we have discussed several advantages of whole life insurance in terms of its capacity to provide you with unlimited time to achieve your life goals, and guarantees that stretch its utility beyond simply providing a death benefit. Properly implemented by a skilled and knowl- edgeable professional, whole life insurance can be an important complement to your existing retirement planning strategy.

LIFE INSURANCE WITH BENEFITS FOR THE LIVING

Indeed, the most important use of life insurance is to protect widows, widowers and orphans from financial destitution. While term insurance can be used for that purpose, it does require that you die during the term of the contract (5-year, 10-year, or however long) in order for your beneficiaries to collect the benefit. The beauty of whole life insur- ance is that there is no expiration date to the contract. Hopefully you will live a very long time, and if you don’t put it to use to protect your spouse and young children, you can very effectively use it post retirement – while you are still alive. A quick refresher before we begin: remember, provided you pay the premiums, whole life insurance builds up cash value over time. You get to choose how you use those cash values1.

Many people have a retirement plan, such as a 401(k) or 403(b) plan, the assets within which are primarily made up of mutual funds. Mutual funds are subject to the whims of the market. Whole life insurance is not.

It is what we call a non-correlated asset to the investment marketplace. Non-correlated asset classes are beneficial for people in retirement because historical financial market data tells us that on average, for every ten years worth of time, the market is negative in its yield for three years. In those negative years, you may want to use the cash value of your whole life insurance policy to bolster your retirement plan and give your portfolio time to recover.
A PERMISSION SLIP TO SPEND ALL OF YOUR RETIREMENT ASSETS

Frequently, when you accumulate a large sum of money (say, in a 401(k) plan), you don’t know how to spend it safely. What if you live a long time and run out of money? Some people feel conflicted between spend- ing all of their retirement assets and leaving something to their spouse and/or children. Owning whole life insurance gives you a per- mission slip to spend all of your money and have it replaced by the whole life insurance policy for the purpose of providing for your spouse, children or a beloved cause.
ACHIEVING THE RIGHT MIX

If you speak with an investment profes- sional, chances are they will tout the benefits of keeping your savings entirely in the finan- cial markets. An insurance professional, on the other hand, may heavily promote insur- ance products. The right answer is achiev- ing the correct mix of tools to support your retirement strategy. Just as there is a healthy composition of equities to fixed income in an investment portfolio (a concept known as the ‘efficient frontier’), so is there a healthy composition of whole life insurance death benefit to market-correlated retirement assets. This is all to say that there are many benefits to continuing to save in your 401(k) or other retirement plans. Just don’t put all your eggs into one basket. Adding a non-correlated asset such as whole life insurance not only diversifies your portfolio, but it also adds a new retirement income source.

LAST BUT NOT LEAST, CONSIDER WHOLE LIFE INSURANCE AS PART OF YOUR LONG TERM CARE PLAN

As life expectancies increase so does the likelihood of needing long term care. The US government estimates that almost 70% of people turning age 65 will need long-term care at some point in their lives (Source: www. longtermcare.gov). However, many people are hesitant about purchasing long term care insurance because they think they may not need it. You can use the built up cash value within your whole life insurance policy to help pay for long term care services2. You can also combine life insurance and long term care products, and enhance your plan through additional features such as acceler- ated death benefits.

WORK WITH AN EXPERIENCED PROFESSIONAL

Though we have made this point before, we cannot stress it enough. It is critical that you work with an experienced and knowl- edgeable financial services professional who understands the complexities of insurance and retirement planning, and knows the par- ticular challenges and needs of working with professionals in the dental field.

ABOUT TRELOAR & HEISEL

Treloar & Heisel is the premier finan- cial services provider to dental and medical professionals across the country. We assist thousands of clients from residency to prac- tice and through retirement with a compre- hensive suite of financial services, custom- tailored advice, and a strong national network focused on delivering the highest level of service. For more information, contact us at (800) 345-6040, info@th-online.net, or visit us at http://www.treloaronline.com.

1 Access to cash values through borrowing or partial surrenders will reduce the policy’s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.
2 Accessing cash values, through loans and partial surrenders or by accelerating benefits for long term care benefit payments, will reduce the death benefit payable, the cash surrender value and the long term care coverage available.